South Africa's business confidence hits 16-year low, weakens rand

South Africa’s business confidence fell to its lowest level in more than 16 years due to subdued domestic economic performance and global financial market turmoil, a survey showed on Thursday, pushing the rand to a week’s low against the dollar.

The Business Confidence Index fell to 84.3 in August, retracting to an even lower level than in June after increasing 87.9 in July, the South African Chamber of Commerce and Industry (SACCI) said in a statement.

The rand fell one percent in response to the report, touching a session trough of 13.5735 to the dollar, its softest in more than a week, according to Thomson Reuters data.

“The present slow growth of 1.2 percent year-on-year in South Africa for the 2nd quarter of 2015 concerns SACCI. An uncertain local economic policy climate perpetuates the underperforming economy and dwindling local business confidence,” SACCI said.

Africa’s most advanced economy shrunk by 1.3 percent in the second quarter for the first time in more than a year, raising the risk that labour disputes and slowing Chinese demand for commodities could push it towards recession.

“The turmoil following China’s decision to devalue its currency has spread throughout the globe and the South African economy is certainly not immune,” said Dennis de Jong, an analyst at UFX.com.

Moody’s Senior Vice President, Kristin Lindow, said in a statement on Wednesday that electricity shortages, low commodity prices, a drought and weaker-than-expected global growth will constrain the economy over the next 18 months.

The volatile and lower commodity prices together with unpredictable financial markets, contribute to the uneasiness, the business body said.

Slower growth in China, a key importer of local commodities, has had an impact on commodity prices, adding pressure on the local mining sector. Almost 12,000 mining jobs were on the line in South Africa as mining companies cut costs.